What is the difference between IFRS S2 and TCFD, and is TCFD still used?

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Senseible · Accepted Answer

TCFD is a set of recommendations from 2017; IFRS S2, issued by the ISSB in June 2023, is a full standard built on them. IFRS S2 keeps TCFD's four pillars but adds firm requirements, including Scope 3 and industry metrics. The TCFD finished its work in 2023 and the IFRS Foundation took over monitoring from 2024. Both organise climate disclosure under four pillars: governance, strategy, risk management, and metrics and targets. A company that already reports to TCFD has most of the structure IFRS S2 expects. It is a standard with shall requirements, not recommendations, meant to sit in or alongside financial statements. Scope 1, 2 and 3 emissions are required, measured with the GHG Protocol, with some transition reliefs in the first year. Industry-based metrics, drawn from SASB standards, are part of the guidance. Current and anticipated financial effects of climate risks and opportunities must be described. Climate resilience must be assessed with scenario analysis proportionate to the company's circumstances. Information on any transition plan, targets and use of carbon credits must be disclosed. The Financial Stability Board confirmed in October 2023 that the TCFD had completed its work, and asked the IFRS Foundation to monitor company climate disclosures from 2024. Many questionnaires, lender templates and older national rules still use TCFD headings, so the term remains in use. Treat a TCFD request as a request for the four pillars, and answer it with figures that would also meet IFRS S2. If your country or exchange has adopted IFRS S2 or a local version, follow that. If a lender or customer sends a TCFD template, answer the four pillars with GHG Protocol figures. If neither applies, build toward IFRS S2: it covers everything TCFD asked for and more.